UK Coal profits soar to £40m despite pit losses

UK Coal, the mining and property company, yesterday reported a 143% jump in first half pre-tax profit to £40.6m as it increased the value of its property.

The group's mining division posted a loss of £10.8m, a £15.3m loss at its deep mines offsetting a £4.5m profit at its surface mining unit. This was partly due to a temporary halt in production at its Daw Mill deep mine in the West Midlands after a worker died in January.

Jon Lloyd, the group's former property director who replaced Gerry Spindler as chief executive, said: "We knew we were in for some tough geological conditions. What we didn't know was that in January we were going to have another fatality which closed Daw Mill."

He said the deep mining operations had achieved an operating profit since June, and the performance of the overall mining division would be boosted by the company's negotiation of a growing number of new sales contracts that would be at much higher market prices.

Mr Lloyd said that at the end of the year, out of a coal output of 9.5m tonnes, 5m would service the long-standing contracts at lower prices, and 4.5m would be sold on newly negotiated higher prices.

Chris Millington, an analyst at Landsbanki, said: "With coal prices standing at £1.84 a gigajoule versus a contract price at £1.52 a gigajoule, the outlook - as contract volumes are progressively replaced by volumes at spot prices - is very positive."

UK Coal also announced its finance director Chris Mawe's departure on September 17. He will be replaced by David Brocksom of Pace Micro Technology.

Mr Lloyd said during Mr Mawe's time at the company, it had turned itself around. UK Coal announced that its land and property portfolio had increased in value by 16% to £398m and estimated it would be worth £900m in 2012.